Disclaimer: Any opinions expressed, potshots taken, or scientific views articulated are mine, and need not represent the opinions, potshots, or scientific views of the Federal Reserve Bank of St. Louis, or the Federal Reserve System.

Friday, September 30, 2011

Owls, Hawks, and Doves

Indeed, some commentators assign a label of "hawk" or "dove" to the various FOMC participants in an attempt to characterize how we prioritize the goals of maximum employment and price stability. In my view, such labels are ill conceived and misleading because everyone on the Committee is fully committed to promoting both of these goals. Incidentally, since my kids now love describing everyone as a hawk or a dove or some other kind of bird, I have taken to reminding them of this conviction I have: When my colleagues and I are doing our job correctly, we are neither hawks nor doves but owls--that is, we are trying to be as wise as possible in deploying all the tools we have to fulfill our legal mandate.

I've never thought the labels "hawks" and "doves" were particularly useful. Some people seem to be stuck on the notion that views on the FOMC are simply a matter of choosing a point on the Phillips curve. Hawks and doves in this view are simply individuals with different preferences over inflation and unemployment, with the doves being much more willing to tolerate higher inflation to achieve lower unemployment. Of course since the 1970s we all know that central bankers should not be thinking about Phillips curve tradeoffs, right?

Here is something interesting I learned today. Apparently the average layperson (in this case meaning non-biologist) grossly mischaracterizes the behavior of birds. Sarah Bloom Raskin falls in line with standard mischaracterizations by thinking of the owl as a wise, and presumably "nice", bird. Actually, the owl is as much a predator as the hawk, and typically survives on a diet that includes mice, rats, and hares. The owl's beak is much like a hawk's, allowing it to kill its prey before eating it whole. Further, the owl is very sneaky, having evolved to be extremely quiet so that it can surprise its dinner. Owls are also loners, and not known for getting along in groups.

Further, in terms of vision, the hawk appears to dominate the owl. A hawk can have about 1 million photoreceptors per square mm in the retina as opposed to 200,000 for humans. The owl, however, is noted for being farsighted, perhaps a good quality in central bankers, but basically it can't read the General Theory (or Recursive Methods in Economic Dynamics) up close. As well, the owl is backward-looking, a definite drawback. Though its eyes face forward (making it look human, and therefore "wise"), the eyes don't move in their sockets. The owl compensates for this by turning its whole head. In fact, it can swivel its head 270 degrees, i.e. it can essentially look backward.

Raskin is certainly not the first case of a Fed Governor appointment where monetary policy credentials are absent. Barnie Frank seems to think that Governors are preferable to regional Fed Presidents, but in the current case I would take the latter over the former any day.

You clearly have a different definition of hawk and dove. For you, hawkish is when you tighten, and dovish is when you accommodate. Under some notions of what hawks and doves are, a central bank with an inflation target would be a hawk all the time.

Steve: yes. I am sort of agreeing with you. There's something a bit wrong (not "particularly useful") about the current way those terms are used. I'm suggesting what I think is a more useful definition.